Most trade between countries is of the interindustry variety-that is, a country will trade one good for a different good. Is this statement true or false? Explain.

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A significant amount of trade is intraindustry trade-that is, a country will trade the same good with another country. Interindustry trade exists because of comparative advantage. Intraindustry trade exists because of expanded markets. A country can gain by producing more of one type of good within an industry and trading for another type of good within the same industry if there are economies of scale. In this case, as production expands, average cost will fall. For example, many countries produce cars but still trade cars with other countries.

Most Trade Between Countries Is of the Interindustry Variety-That Is